What Cryptocurrency Exchange Regulations Mean for You

Cryptocurrencies, Exchanges, Law and Regulation, News, Opinion
  • The U.S. Securities and Exchange Commission tightens the noose on exchanges
  • Bitcoin drops to half it’s all-time high
  • Regulation-compliant companies push ahead

It was no surprise when the SEC announced on March 7, 2018, that they would begin imposing regulations on cryptocurrency exchanges. This announcement comes after months of criticism of cryptocurrencies from Jay Clayton, Chairman of the SEC, and it saw Bitcoin drop to sub-$10,000 levels – around half of its all-time high.

“A number of these platforms provide a mechanism for trading assets that meet the definition of a ‘security’ under the federal securities laws,” the SEC release states.

Since Clayton considers all ICO-derived coins and tokens to be securities, every crypto exchange is susceptible to SEC regulations if they want to continue allowing access to US residents.

After the announcement, Spencer Bogart, a partner at Blockchain Capital, states that “the SEC continues to draw a line in the sand between securities and non-securities but without going so far as to name names.” The SEC has only named the crypto companies it has actively enforced against so far.

However, the crypto world is already making moves toward self-regulation. Should such self-regulation be accepted, it could assist American Congress and other regulatory bodies around the world to produce constructive regulation for this changing landscape.

“Securities tokens are an exciting combination of blockchain technology and the heavily regulated securities industry,” says lawyer and Chief of Operations for Polymath, Chris Housser. “Polymath is looking to create a self-regulatory organization and to work with regulators and help define standards in this new environment.”

With programmable securities tokens, the blockchain itself can restrict trading to only authorized investors. It eliminates the need for regulators to monitor third-party exchanges. Housser adds: “KYC is embedded in the tokens themselves. Using the Polymath ST20 standard, for example, such tokens cannot be traded to participants who have not been authorized to trade by the security token issuer.”

Recently, the Japan Blockchain Association (JBA) and the Japan Cryptocurrency Business Association (JCBA) reached an agreement that will see a new self-regulating body formed that is yet unnamed. The two entities comprise 16 government-approved cryptocurrency exchanges and will become the largest self-regulatory organization (SRO) in the crypto space.

Polymath, like tZero, believes that blockchain-based distributed ledger technology can replace outdated and outmoded Wall Street trading markets. SRO’s are the next logical step.

Blockchain technology is disruptive by its very nature and can bypass fat cat middlemen, like brokers, and pre-empt crusty old regulatory bodies’ decisions by responsible and legal self-regulation.

Polymath is a solid example of this since tokens launched using their standard will enforce many of the standards that regulators look for.

“We want to make the job easier for regulators,” says Housser. “By working alongside regulators and our industry partners, we hope to create a standard whereby the securities token ecosystem can self-enforce on the blockchain.”

Chronic crypto nut and freelance writer/editor for longer than I care to remember. Have finally found a home here at Crypto Disrupt.

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